Nationwide Mortgage Licensing System (NMLS) Practice Exam

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Prepare for the Nationwide Mortgage Licensing System (NMLS) Exam. Utilize flashcards and multiple choice questions, each with hints and explanations. Ensure your success by getting thoroughly prepared!

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The term "20 basis points" expressed as a percentage is:

0.2%
0.20%
2.00%
20.00%

The correct answer is: 0.20%

To determine what "20 basis points" represents in terms of percentages, it's essential to understand the conversion relationship between basis points and percentage points. One basis point is defined as one-hundredth of a percentage point, or 0.01%. Therefore, to convert basis points to a percentage, you would divide the number of basis points by 100. In this case, 20 basis points would be calculated as follows: 20 basis points = 20 / 100 = 0.20% This conversion helps in various financial contexts, especially in discussions about interest rates, fees, and investment returns, where precise changes in rates or fees can have significant implications. The correct choice reflects this accurate transformation of basis points into a percentage format, which is important for anyone working in finance or dealing with mortgages and loans.